The Squeeze: The nasty phenomenon affecting every purse or wallet in the country

Richard Edgar

Former Economics Editor

Wages are going up by just 0.8 per cent while the price of goods and services continues to rise. Credit: Gaetan Bally/PA Wire

The Squeeze. It could be the title of a horror B-movie but it describes a pretty nasty phenomenon affecting every purse or wallet in the country.

Wages have been falling behind price rises for some time.

This morning we have just learned that wages are going up by just 0.8 per cent, while the price we pay for goods and services is rising almost four times faster at 2.8 per cent.

That squeeze on spending power is a worry not just for the Bank of England, whose job it is to keep inflation under control, but also for the government.

Advisors to the Chancellor are aware that voters are very sensitive to the erosion of incomes.

Sir Mervyn King will step down as the governor of the Bank of England next month ,after a decade in charge. Credit: Fredrik Von Erichsen/PA Wire

The governor of the Bank of England, Sir Mervyn King, is about to explain where he thinks inflation is going to go as well as a broader assessment of the economy.

It's his last formal chance to comment on the economy as he steps down next month after a decade in charge. Will he be able to hand over a country finally turning the corner?

There are some hints that the bad news is getting a bit less-bad.